Saturday, 2024 July 13

Tencent Music reports strong Q2 results despite antitrust penalty expected to impact Q3 business

Tencent Music Entertainment Group, an online music and audio entertainment platform, announced stronger-than-expected results for the second quarter. Despite Chinese regulators introducing stricter rules for the tech sector over the last few months, Tencent Music boosted revenue and the number of its paying users increased substantially.

The company logged revenue of RMB 8.01 billion (USD1.24 billion) in Q2, a 15.5% year-on-year growth. Revenues from music subscriptions were RMB1.79 billion (USD 277 million), representing a 36.3% YoY increase. Online music paying users jumped to 66.2 million, a record 40.6% bump. The second quarter added 5.3 million paying users, the largest quarterly net increase since 2016. Close to 10.6% of Tencent users are paying for premium services, up from 7.2% in Q2 2020.

The increase in paying users is a result of effective marketing and the company’s continuing progress of adding popular music to its subscription plan, according to Tencent’s chief strategy officer Tony Yip. He added that most users are accustomed to paying for music, and are willing to pay a monthly subscription fee for high-quality music.

On July 24, the company was ordered by China’s antitrust regulator to give up its exclusive music rights within 30 days and was fined RMB 500,000 (USD 77,100) for anti-competitive behavior as Beijing continues to crack down on the country’s tech companies. In response, Tencent, along with its affiliates, including Tencent Music Entertainment, said they will work together to make those changes and ensure full compliance.

“We would like to reiterate that TME sincerely accepts the decision issued in July by the regulator pertaining to exclusive music licensing arrangements. We are committed to fully complying with all requirements in a timely manner. While we expect some impact to our business operations as a result of this decision, we remain steadfast in our ongoing goals,” said Cussion Pang, executive chairman of Tencent Music.

To alleviate the impact of giving up exclusive licenses, the company plans to offer more original content by cultivating and promoting musicians through the Tencent Musician platform, as well as co-produce songs across a variety of sectors with well-known IPs. It also plans to add popular and trendy content to woo younger listeners. In addition, the company hopes to shape QQ Music’s image as a hip brand.

The company also revealed that it is working closely with major platforms in the Tencent ecosystem, such as WeChat and Tencent Video, to maximize exposure for musicians and boost user engagement.

Tencent Music’s shares rose 3.36% in after-hours trading on the New York Stock Exchange. The company’s shares have fallen by more than 50% cumulatively in 2021, with a significant retreat of more than 70% from the year’s highest point, mainly due to the impact of the Chinese government’s anti-monopoly regulations.

Read this: Tencent’s game streaming mega merger hit a regulatory wall, so who lost out?

Mengyuan Ge
Mengyuan Ge
Mengyuan Ge is a passionate tech reporter of 36Kr Global in Beijing. She covers market trends, start-ups as well as big-techs in China.

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